Dueling with Dragons 2.0: The Next Phase of Global Corporate Competition

The competitive landscape in emerging markets is maturing. In fact, the number of companies worth more than $1 billion has tripled in the past ten years. As a result of this growth, more industries are in danger of disruption.

Consider this: US, European, and Japanese companies accounted for 90% of global photovoltaic products in 2005. Today, four out of the world’s five top players in that segment are based in China.

Take a look, for example, at the chemicals, construction equipment, and automotive suppliers industries. They are at very different stages of globalization maturity. But in all of them, emerging market-based challenger companies have grown much faster than multinational companies over the last five years. The growth differential in chemicals was on average 5% per year; in construction equipment, almost 10% per year; and in automotive suppliers, a staggering 25% per year. Given this, they are likely to catch up or even overtake by 2020.

As companies and industries build capabilities, they have greater opportunity for globalization. Companies based in emerging markets are dramatically transforming the global automotive supply, construction equipment, and chemical industries.

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Preparing for Turbulent Times

Both multinational companies and challengers need to prepare for the seismic shift that is expected in the next five to ten years. Development speed will happen at such a fast pace that ill-prepared companies are bound to fail.

Multinationals must defend their traditional core business by defining a sustainable premium value proposition, aggressively tackling the cost gap, and investing in go-to-market activities. They also need to expand their business by defining midmarket portfolios and globalizing operations and the sales and service footprint.

Challengers need to upgrade core corporate capabilities and processes to keep pace with rapid growth and the need to go abroad. For many, having a global M&A strategy is key. They also have to invest in technology to close the gaps between capabilities and market demands.

The number of large companies from emerging markets has doubled over the last decade—and even risen by a factor of six in Asia, overtaking Japan.

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